January 21, 2002; San Juan Basin Royalty Trust Development Outlays Prevent Cash Distribution

 Investors in recommended San Juan Basin Royalty Trust should keep in mind that we provide unusually thorough statistical coverage of the stock in our separate publication, Meter Reader Tables available on www.mcdep.com.  The coverage now includes a calculation of future monthly distributions that we make after taking account of recent operating and financial trends.  We make no pretense of our ability to know the future.  The projections are what any thoughtful person might make considering the historical results disclosed monthly. 

With that background no one ought to be much surprised that the most recent declaration was for no distribution for the second month in a row.  Yet our mechanical projection indicated a distribution of $0.03.  More than half the difference is explained by the highest monthly development expenditures since December 2000.  Not having any guidance we had projected those outlays at the 12-month average.  Even with those temporarily high expenditures the declaration would have been about $0.04 per unit had not it been necessary to make up for a shortfall from last month. 

Our calculations indicate expected declarations of $0.03 and $0.05 for the next two months (see Table SJT-3 in MR Tables).  Our projections for the Next Twelve Months ended March 31, 2003 add to $0.83 per unit (see Table SJT-2).

Note that with the January 2002 declaration now history we shift our Next Twelve Month period to the end of the first quarter next year.  That change has the effect of raising the estimated distribution as low current payout is replaced in the running total by more normal payout expected next winter.  We also display that result as a distribution yield of 8.7% for the Next Twelve Months (see Table S-2 in this edition of Meter Reader).  

Keep in mind the mechanical nature of our projections.  We take our price forecast, the most important variable from the futures market.  Though the futures market makes the best forecast with the information available, it can change instantly just like the stock market and interest rates. 

Finally, there is a silver lining in our detailed analysis.  For investors willing to go through a little effort there is a great saving.  There is no general partner stripping half the cash flow from SJT in return for smoothing out the distribution and telling unitholders all is rosy.